HousingWireHousingWire
The ongoing trade war has created significant uncertainty for homebuilders, and it’s starting to show up in construction data.
The March residential construction report from the U.S. Census Bureau shows single-family housing starts dropping 9.7% year over year to a seasonally adjusted annual rate of 940,000 — the lowest reading since July 2024.
Single-family permits also dropped 0.6% annually to a rate of 978,000, although that number is in line with readings over the past year. The numbers compared to February also dropped.
Taken together, the report shows that homebuilders are pulling back on construction as high tariffs on China are reducing profit margins and giving prospective homebuyers pause.
“Escalating policy uncertainty is weighing on builder confidence, just as it is for potential home buyers,” Zillow senior economist Orphe Divounguy said in a statement. “Builders have slowed the pace of new construction. Increasing competition among sellers, and higher costs for land, labor and building materials are squeezing profit margins and causing many builders to move to the sidelines.”
The situation has weighed on builders. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index for April landed at a reading of 40. While that’s an increase of 1 point from March, the uptick followed an 8-point drop from January through March.
Looking ahead, it appears that fewer homes will come online in the coming months. Single-family homes under construction are down 8.7% compared to the same time last year, although the number of single-family completions is up 9.6%.
Regionally, there aren’t too many bright spots. In the Northeast, single-family permits rose by 25% year over year. But they were down annually in the Midwest (-2.3%), South (-0.7%) and West (-6%).
Single-family starts are also down year over year in the Northeast (-1.5%), Midwest (-12.6%) and South (-14.8%), although they’re up by 3.6% in the West.
President Donald Trump’s aggressive tariffs on China are brutal for homebuilders. According to NAHB, 27% of building materials used in home construction come from China. And according to the Peterson Institute for International Economics, the current effective tariff rate on China is an astronomical 147.6%.
NAHB has previously asked for a tariff exemption on construction imports but has yet to receive one. Instead, Trump has maintained a 25% levy on all steel and aluminum imports, and the tit-for-tat tariff war with China seems to only be escalating.
“Residential building material costs are still more than 40% higher than pre-pandemic levels, making construction more expensive,” Odeta Kushi, First American‘s deputy chief economist, said in a statement.
“Recent tariff actions could push costs even higher, with builders estimating an additional $10,900 per home. If these tariffs persist, builders will have no choice but to pass on the costs to consumers, who are already struggling with housing affordability.”
